Value-added tax (VAT)
VAT is chargeable on all taxable goods and services supplied in, or imported into the United Republic of Tanzania. The standard rate of VAT is 18% in Mainland Tanzania and 15% in Tanzania Zanzibar, but the export of goods and certain services is eligible for zero rating. Generally, businesses with or expecting to generate an annual taxable turnover of more than TZS 100 million must register for VAT in Mainland Tanzania and TZS 50 million in Tanzania Zanzibar. The Commissioner has the discretion to register (as intending traders) investors whose projects have not commenced production of taxable supplies but wish to be VAT-registered in order to reclaim the tax they incur on start-up costs. A business that only makes exempt supplies is unable to register for VAT and, consequently, unable to recover the VAT incurred on inputs.
Registered businesses must submit VAT returns, and pay any tax due, on a monthly basis.
There is also mandatory registration for professional service providers (e.g. lawyers and accountants) and government entities/institutions carrying out economic activities. A non-resident who carries on an economic activity in Mainland Tanzania without a fixed place (e.g. non-resident suppliers of B2C electronic services) and makes taxable supplies in excess of the VAT registration threshold is required to appoint a VAT representative.
For imported goods, VAT is payable at the time of importation together with any customs and excise duties. VAT payable with respect to specific capital goods (as defined) imported in Tanzania may be deferred, subject to certain procedures being followed.
For imported services, VAT is accounted for by registered businesses through a 'reverse-charge' mechanism, and such accounting is only relevant where a taxpayer has exempt supplies of 10% or more of the total supplies.
Depending on the industry, there are a number of exempt supplies. These include (this list is not exhaustive):
- Agricultural implements, agricultural inputs, livestock, basic agricultural products and food for human consumption; implements for fisheries; bee-keeping implements, dairy equipment and medicine or pharmaceutical products.
- Import of food, clothing, and shoes donated to non-profit organisations for free distribution to orphanages or schools for children with special needs in Mainland Tanzania.
- Goods imported by non-profit organisations for the provision of emergency and disaster relief (conditional).
- Goods imported by religious organisations for the provision of health, education, water, and religious services (conditional).
- Educational services provided by a relevant approved educational institution; education materials.
- Import of laboratory equipment and reagents by a registered educational institution and to be used solely for educational purposes.
- Goods eligible for relief under the East African Customs Management Act (where imported by a registered and licensed explorer or prospector for exclusive use in oil, gas, or mineral exploration or prospecting activities).
- Various goods imported by a natural gas distributor (including compressed natural gas [CNG] plants equipment, natural gas pipes, transportation and distribution pipes, CNG storage cascades, CNG special transportation vehicles, natural gas metering equipment, CNG refuelling of filling, gas receiving units, flare gas system, condensate tanks and leading facility, system piping and pipe rack, and condensate stabiliser).
- Healthcare, medicine, or pharmaceuticals products, including food supplements or vitamins supplied to the government; articles designed for people with special needs; funeral services.
- Fire-fighting vehicles imported by the government and fire-fighting equipment.
- Sale of vacant land.
- Lease, license, hire, or other form of supply, to the extent that it is a supply of the right to occupy and reside in residential premises.
- Water (except bottled or canned water or similarly presented water).
- Supply of solar panels, modules, solar charger controllers, solar inverters, vacuum tube solar collectors, and solar batteries.
- Unprocessed edible vegetables.
- Insurance for health, life, aircraft, workers compensation and crop agriculture.
- Petroleum products.
- Pasteurised and unpasteurised goat and cow milk, excluding milk with additives and long-life milk.
- Supply of aircraft lubricants of HS Codes 2710.19.51, 2710.19.52, 3403.19.00, and 3403.99.00 to a local operator of air transportation.
- Imported refrigerated containers of HS Code 8418.69.90 by a person engaged in horticulture for exclusive use in horticulture.
- Imported grain drying equipment of HS Code 8419.31.00 by a person engaged in agriculture for exclusive use in agriculture.
- Importation of aircraft lubricants, airline tickets, brochures leaflets, calendars, diaries, headed papers, and airline uniforms engraved or printed or marked with airline logo and imported under a Bilateral Air Services Agreement between the Government of United Republic of Tanzania and a foreign government.
- A supply or importation of smartphones of HS Code 8517.12.00, tablets of HS Code 8471.30.00 or 8517.12.00 and modems of 8517.62.00 or 8517.69.00.
- An import of precious minerals, tin, tungsten, tantalum, mineral concentrates and loaded carbon by any person for processing, smelting, refining or sale in the Mineral and Gem Houses or buying stations designated by the Mining Commission.
- An import of contactless smart cards and consumables of HS codes 3921.11.90 by the National Identification Authority.
- An import of cold rooms of HS Code 9406.10.10 and 9406.90.10 by a person engaged in horticulture.
- An import of artificial grass of HS Code 5703.30.00 and 5703.20.00 for football pitches located in City or Municipal Council approved by the National Sports Council of Tanzania.
The VAT Act contains restrictions on claiming of input tax. For example, one cannot claim VAT incurred on entertainment, membership to sporting, social, or recreational clubs or associations, spare parts and repair or maintenance costs in respect of passenger vehicles.
The input tax claim time limit is six months. However, this time limit starts to run by reference to the date of the tax invoice/fiscal receipt.
Input tax incurred on goods in the six months prior to VAT registration can be claimed no later than in the third VAT return submitted following registration.
A company with taxable supplies of more than 90% of total supplies is entitled to full input tax credit while a company with taxable supplies less than 10% of total supplies is not entitled to claim any input tax incurred.
A company with taxable supplies between 10% and 90% of total supplies is entitled to partial input tax recovery. Two methods of apportionment, namely the average method and direct attribution method, can be used. Imported services are not taken into account as supplies when determining the allowance of input tax for partial exemption purposes.
Businesses entitled to VAT refunds can claim any remaining credit six months after the refund first became due, subject to all intervening returns being rendered. Any claim for a VAT refund must be supported by an auditor's certificate of genuineness. Businesses in a consistent refund position (e.g. exporters) may apply for approval to lodge their refund claims on a monthly basis.
The VAT Act includes specific requirements to be met by a fiscalised tax invoice to facilitate a refund claim. This includes claims made by diplomats and international organisations. A fiscal receipt is defined to include receipt issued by the Government Electronic Payment Gateway.
VAT in Tanzania Zanzibar is administered under a separate but similar legislation.
Tanzania is a member of the East African Community, which became a Customs Union on 1 January 2005 on the implementation of the East African Customs Union Protocol. This protocol provides for a common external tariff (CET), elimination of internal tariffs, rules of origin, anti-dumping measures, a common customs law, and common export promotion schemes.
Generally, the import duty rates applicable under the CET are as follows:
|Raw materials, capital goods, agricultural inputs, pure-bred animals, medicines||0|
|Finished consumer goods||25|
|Machinery and spare parts imported by licensed mining companies and used in mining activities||0|
|Machinery and inputs (excluding motor vehicles) imported by a licensed company for direct and exclusive use in oil, gas or geothermal exploration, development and distribution upon approval by the a competent authority||0|
Goods originating in Southern Africa Developing Countries (SADC) or the East African Community (EAC) have preferential or nil customs duty rates, subject to meeting the Rules of Origin Criteria. Most imports are also subject to Railways Development Levy of 1.5% (except goods that are exempted from import duty, pharmaceutical goods, fertilizers as defined in the EAC Common External Tariff and Kerosene type Jet A1 fuel classified under HS Code 2710.19.21) and Destination Inspection Fee of 0.6% of the FOB value.
Excise duty rates apply on specific or ad valorem basis as follows (this list is not exhaustive):
|Item||Rate for FY 2021/22 (TZS)|
|Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter||9 per litre/232 per litre|
|Imported powdered juice||232 per litre|
|Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter or flavoured; ice and snow||58 per litre/64.05 per litre|
|Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09||61 per litre|
|Non-alcoholic beer||561 per litre/589 per litre|
|Imported powdered beer||844 per litre|
|Beer made from malt||620 per litre/ 765 per litre/803.25 per litre|
|Beer made from 100% local unmalted cereals||450 per litre|
|Wine with more than 25% imported grapes; cider||2,466.45 per litre|
|Wine with domestic grapes, banana, tomato, rosella content exceeding 75%||200 per litre|
|Spirits, vodka, and whiskies||540 per litre/3,978 per litre/4,386.06 per litre|
|Cigarettes without filter containing more than 75% domestic tobacco||12,447 per mil|
|Cigarettes with filter containing more than 75% domestic tobacco||29,425 per mil|
|Other cigarettes not mentioned above||55,896.75 per mil|
|Cut rag/filler (imported)||28,232.40 per kg|
|Motor spirit (gasoline) premium||339 per litre|
|Motor spirit (gasoline) regular||379 per litre|
|Gas oil (diesel)||255 per litre|
|Kerosene type Jet fuel||NIL|
|Illuminating kerosene (2710.19.22)||465 per litre|
|Industrial diesel oil||392 per litre|
|Heavy furnace oil||0 per litre|
|Lubrication oil (containing petroleum oils or oils obtained from bituminous minerals)||669 per m³|
|Other lubrication oils||699 per m³|
|Lubrication greases||0.79 per kg|
|Music and film products||50 per unit|
|Item||Rate for FY 2021/22 (%)|
|Satellite and cable television broadcasting||5|
|Electronic communication services||17|
|Charges or fees by a telecommunication service provider or other payment system providers licensed under the National Payment Systems Act for money transfer and payment service||10|
|Charges or fees by a financial institution for services provided by such institution||10|
|Disposable plastic bags||50|
|Liquefied petroleum gas (LPG)||0|
|Motor car with cylinder capacity exceeding 1,500cc but not exceeding 2,000cc||5|
|Motor vehicle with engine size greater than 2,000cc but not exceeding 3,000cc||5|
|Old motorcycles (more than three years)||10|
|Old passenger motor vehicles (more than five years)||10|
|Old motor vehicles (eight years but not more than ten years)||15|
|Old motor vehicles (more than ten years)||30|
|Imported used spare parts (for vehicles, motorcycles, domestic and electrical appliances)||25|
|Imported furniture (per unit)||15|
|Aircraft (including helicopters, aeroplanes) but excluding commercial aircraft, yachts, and other vessels for pleasure or sport||20|
Fuel levy is charged on petroleum and diesel at a rate of TZS 413 per litre.
Petroleum levy is charged on petroleum, diesel, and kerosene at TZS 100 per litre.
Examples of instruments giving rise to stamp duty obligations include conveyances, leases, share transfers, and issue and transfer of debentures. For most of these instruments, the applicable stamp duty rate is 1% of the consideration.
Railways Development Levy (RDL)
RDL applies at the rate of 1.5% of the CIF value of goods entered for home consumption). The levy is not applicable to imported goods that have relief or exemption under the East African Community Customs Management Act 2004 (EACCMA 2004), pharmaceutical goods, etc.
Payroll taxes and social security contribution
Apart from individual income tax (deducted at source by the employer), payroll taxes include:
- Skills and development levy at 4% of payroll cash costs. This applies to every employer who has in his employment ten or more employees
- 20% social security contribution, which is normally split equally between employer and employee (i.e. 10% each).
- Workers compensation fund tariff charged at 0.6% (for private sector) or 0.5% (for public sector) of cash sums paid to employees. The tariff is payable on a monthly basis.
Under the gaming tax, gaming prize winners are taxed at a maximum of 15% on the amount or value of the winnings. Whereas, gaming activities are taxed at a maximum of 25%.
The TRA levies a property tax based on the value of a premises. The rates vary depending on the value and location of the property. For unvalued properties, TZS 12,000 is payable for a normal building and TZS 60,000 per storey for a storey building.
The Local Government Authorities are entitled to charge a 0.3% service levy based on turnover generated by corporate bodies in the relevant district.
Produce cess is capped at 3% on food and cash crops and 5% on forest products such as timber, charcoal, and logs. However, there is an exemption on the transportation of crops of less than one tonne from one district to another.